Question 1

In recent years the Federal Open Market Committee has focused on a target for

Accepted Answer

A)  M1 growth. 
B)  the federal funds rate. 
C)  the number of Treasury Securities issued by the federal government. 
D)  total reserves of banks. 
A)  M1 growth. 
B)  the federal funds rate. 
C)  the number of Treasury Securities issued by the federal government. 
D)  total reserves of banks.

Question 2

Which of the following best illustrates the medium of exchange function of money?

Accepted Answer

A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct. 
A)  You keep some money hidden in your shoe. 
B)  You keep track of the value of your assets in terms of currency. 
C)  You pay for your oil change using currency. 
D)  None of the above is correct.

Question 3

The Federal Reserve

Accepted Answer

A)  was created in 1836. 
B)  serves as a lender of last resort. 
C)  was created to facilitate the federal government's collection of taxes as well as its expenditures. 
D)  All of the above are correct. 
A)  was created in 1836. 
B)  serves as a lender of last resort. 
C)  was created to facilitate the federal government's collection of taxes as well as its expenditures. 
D)  All of the above are correct.

Question 4

If an economy used gold as money, its money would be

Accepted Answer

A)  commodity money, but not fiat money. 
B)  fiat money, but not commodity money. 
C)  both fiat and commodity money. 
D)  functioning as a store of value and as a unit of account, but not as a medium of exchange. 
A)  commodity money, but not fiat money. 
B)  fiat money, but not commodity money. 
C)  both fiat and commodity money. 
D)  functioning as a store of value and as a unit of account, but not as a medium of exchange.

Question 5

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A)  deposits of its customers and loans to it customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers 
A)  deposits of its customers and loans to it customers 
B)  deposits of its customers but not loans to its customers 
C)  loans of its customers but not the deposits of its customers 
D)  neither the deposits of its customers nor the loans to its customers

Question 6

Explain how each of the following changes the money supply.
a.the Fed buys bonds
b.the Fed auctions credit
c.the Fed raises the discount rate
d.the Fed raises the reserve requirement

Accepted Answer

a.
If the Fed buys bonds, it pays for th

Question 7

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

Accepted Answer

A)  does not change the money supply. 
B)  increases the money supply. 
C)  decreases the money supply. 
D)  has an indeterminate effect on the money supply. 
A)  does not change the money supply. 
B)  increases the money supply. 
C)  decreases the money supply. 
D)  has an indeterminate effect on the money supply.

Question 8

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)  purchased bonds in an attempt to increase the federal funds rate. 
B)  purchased bonds in an attempt to reduce the federal funds rate. 
C)  sold bonds in an attempt to increase the federal funds rate. 
D)  sold bonds in an attempt to reduce the federal funds rate. 
A)  purchased bonds in an attempt to increase the federal funds rate. 
B)  purchased bonds in an attempt to reduce the federal funds rate. 
C)  sold bonds in an attempt to increase the federal funds rate. 
D)  sold bonds in an attempt to reduce the federal funds rate.

Question 9

Table 11-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.
  
-Refer to Table 11-2. The bank's reserve ratio is

Accepted Answer

A)  7.50 percent. 
B)  8.12 percent. 
C)  92.50 percent. 
D)  100 percent. 
A)  7.50 percent. 
B)  8.12 percent. 
C)  92.50 percent. 
D)  100 percent.

Question 10

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

Accepted Answer

A)  $4,500 of new money. 
B)  $48, 913 of new money. 
C)  $56,250 of new money. 
D)  $75,000 of new money. 
A)  $4,500 of new money. 
B)  $48, 913 of new money. 
C)  $56,250 of new money. 
D)  $75,000 of new money.

Question 11

When the Federal Reserve conducts open-market operations to increase the money supply, it

Accepted Answer

A)  redeems Federal Reserve notes. 
B)  buys government bonds from the public. 
C)  raises the discount rate. 
D)  decreases its lending to member banks. 
A)  redeems Federal Reserve notes. 
B)  buys government bonds from the public. 
C)  raises the discount rate. 
D)  decreases its lending to member banks.

Question 12

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

Accepted Answer

A)  those assets are government bonds and the Fed's reason for selling them is to increase the money supply. 
B)  those assets are government bonds and the Fed's reason for selling them is to decrease the money supply. 
C)  those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply. 
D)  those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply. 
A)  those assets are government bonds and the Fed's reason for selling them is to increase the money supply. 
B)  those assets are government bonds and the Fed's reason for selling them is to decrease the money supply. 
C)  those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply. 
D)  those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

Question 13

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not accept deposits. 
B)  banks do not influence the supply of money. 
C)  loans are the only asset item for banks. 
D)  All of the above are correct. 
A)  banks do not accept deposits. 
B)  banks do not influence the supply of money. 
C)  loans are the only asset item for banks. 
D)  All of the above are correct.

Question 14

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Accepted Answer

A)  FOMC 
B)  the Board of Governors 
C)  the New York Fed 
D)  the regional Federal Reserve Banks 
A)  FOMC 
B)  the Board of Governors 
C)  the New York Fed 
D)  the regional Federal Reserve Banks

Question 15

Monetary policy affects employment

Accepted Answer

A)  only in the long run. 
B)  only in the short run. 
C)  in both the long run and the short run. 
D)  in neither the long run nor the short run. 
A)  only in the long run. 
B)  only in the short run. 
C)  in both the long run and the short run. 
D)  in neither the long run nor the short run.

Question 16

M1 includes

Accepted Answer

A)  currency. 
B)  demand deposits. 
C)  traveler's checks. 
D)  All of the above are correct. 
A)  currency. 
B)  demand deposits. 
C)  traveler's checks. 
D)  All of the above are correct.

Question 17

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Accepted Answer

A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply. 
A)  increases the money multiplier and increases the money supply. 
B)  decreases the money multiplier and decreases the money supply. 
C)  does not change the money multiplier, but increases the money supply. 
D)  does not change the money multiplier, but decreases the money supply.

Question 18

Bottles of very fine wine are less liquid than demand deposits.

Accepted Answer

A) True 
 B)False

Question 19

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct. 
A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct.

Question 20

Treasury Bonds are

Accepted Answer

A)  both a store of value and a medium of exchange. 
B)  a store of value, but not a medium of exchange 
C)  a medium of exchange, but not a store of value. 
D)  neither a store of value nor a medium of exchange. 
A)  both a store of value and a medium of exchange. 
B)  a store of value, but not a medium of exchange 
C)  a medium of exchange, but not a store of value. 
D)  neither a store of value nor a medium of exchange.

In recent years the Federal Open Market Committee has focused on a target for

Which of the following best illustrates the medium of exchange function of money?

The Federal Reserve

If an economy used gold as money, its money would be

Which of the following is an asset of a bank and a liability for its customers?

Explain how each of the following changes the money supply. a.the Fed buys bonds b.the Fed auctions credit c.the Fed raises the discount rate d.the Fed raises the reserve requirement

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

A decrease in the money supply might indicate that the Fed had

Table 11-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. -Refer to Table 11-2. The bank's reserve ratio is

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

When the Federal Reserve conducts open-market operations to increase the money supply, it

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

In a system of 100-percent-reserve banking,

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Monetary policy affects employment

M1 includes

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Bottles of very fine wine are less liquid than demand deposits.

In a system of 100-percent-reserve banking,

Treasury Bonds are

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 11: The Monetary System

In recent years the Federal Open Market Committee has focused on a target for

Which of the following best illustrates the medium of exchange function of money?

The Federal Reserve

If an economy used gold as money, its money would be

Which of the following is an asset of a bank and a liability for its customers?

Explain how each of the following changes the money supply. a.the Fed buys bonds b.the Fed auctions credit c.the Fed raises the discount rate d.the Fed raises the reserve requirement

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

A decrease in the money supply might indicate that the Fed had

Table 11-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. -Refer to Table 11-2. The bank's reserve ratio is

If the reserve ratio is 8 percent, then $4,500 of additional reserves can create up to

When the Federal Reserve conducts open-market operations to increase the money supply, it

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

In a system of 100-percent-reserve banking,

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

Monetary policy affects employment

M1 includes

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

Bottles of very fine wine are less liquid than demand deposits.

In a system of 100-percent-reserve banking,

Treasury Bonds are

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters